SEBI Introduces GARUDA Framework to Accelerate AIF Fund Launches

New Delhi, India Jul 31, 2026 ALN: The Securities and Exchange Board of India (SEBI), the regulatory authority for the securities market in India, has introduced a new framework aimed at simplifying and accelerating the process for alternative investment funds (AIFs) to launch new schemes. This initiative, named the Green-channel: AIF Rollout Upon Document Acknowledgement (GARUDA) framework, is designed to address the longstanding challenges that AIFs have faced in launching their investment schemes, which have often been hampered by lengthy regulatory reviews and approval processes.

Under this newly established framework, AIFs can now launch regular schemes within ten working days of filing their private placement memorandum (PPM) with SEBI through a registered merchant banker, unless SEBI indicates otherwise. This marks a significant reduction from the previous requirement that often entailed a more protracted approval timeline. The GARUDA framework is expected to enhance the efficiency of fund launches, thereby promoting a more dynamic investment environment.

For newly-registered AIFs, the framework stipulates that they can initiate their first scheme either after receiving SEBI registration or ten days after filing their PPM, whichever occurs later. This provision is particularly beneficial for new entrants in the AIF space, enabling them to commence operations more swiftly and capitalize on investment opportunities without unnecessary delays.

Historically, AIFs have been required to submit a PPM, which serves as a mandatory disclosure document outlining critical aspects of the scheme, such as the investment strategy, fee structure, associated risks, governance framework, and investor rights. The review process for these documents often led to significant delays in the launch of new schemes. The GARUDA framework aims to mitigate these issues by streamlining the approval process, thus enabling AIFs to respond more effectively to market conditions and investor demands.

One of the key features of the GARUDA framework is its differentiation between regular schemes and specialized funds. Regular schemes are defined as any fund that does not fall under the categories of large value funds (LVFs) for accredited investors, accredited investor-only funds (AIoFs), or angel funds. This distinction allows for tailored regulatory treatment that reflects the unique characteristics and investor bases of these various fund types.

Moreover, the new circular introduces a lighter regulatory treatment for accredited investor-only funds, LVFs, and angel funds. Under the updated rules, these specialized funds are exempt from the requirement to file their PPM through merchant bankers. Instead, they can launch a scheme immediately after submitting the PPM directly to SEBI. This change is expected to further accelerate the launch process for these types of funds, which are often characterized by their niche investment strategies and target audiences.

For first-time LVFs and AIoFs, the framework allows them to commence operations from the date their SEBI registration is granted. Similarly, angel funds are afforded the same flexibility, enabling them to circulate their PPM for soliciting funds from the moment of their SEBI registration. This regulatory relaxation is anticipated to enhance the attractiveness of these investment vehicles for potential investors.

It is important to note that while the filing of the PPM does not equate to SEBI's approval, the responsibility for ensuring the accuracy of the information provided lies with the merchant bankers. They must ensure that there are no omissions or misleading statements within the PPM. Additionally, a formal due diligence certificate, along with “fit and proper” declarations and Permanent Account Number (PAN) details of key leadership and entities, must be submitted on the SEBI intermediary portal. This requirement underscores SEBI's commitment to maintaining high standards of accountability and transparency within the investment ecosystem.

To enhance clarity and prevent confusion among investors, SEBI has mandated specific naming conventions for these specialized funds. Any new AIoF scheme must append the words “AI only fund” or “AIOF” at the end of its official name, while large value funds are required to include “LVF” in their scheme title. This measure aims to ensure that investors can easily identify the nature of the investment vehicle they are considering.

In addition to these provisions, the regulatory relief for AIoFs, LVFs, and angel funds extends to ongoing operational updates. These funds are now exempt from the necessity of employing a merchant banker when notifying SEBI about changes to their private placement memorandums. Instead, the CEO or compliance officer of the AIF can directly file these updates through a formalized undertaking. This change is expected to reduce bureaucratic hurdles and facilitate smoother operational adjustments in response to evolving market conditions.

SEBI has indicated that these updated provisions come into immediate effect, reflecting the urgency and importance of fostering a more responsive regulatory environment for AIFs. The introduction of the GARUDA framework follows a proposal made by SEBI a few months prior to establish a green-channel mechanism that would enable AIFs to launch schemes within ten working days of filing their PPMs, a significant reduction from the previous 30-day timeline.

The overarching goal of the GARUDA framework is to accelerate fund launches by minimizing approval timelines and placing greater reliance on disclosures, certifications, and the accountability of fund managers. This initiative marks a broader shift in SEBI's regulatory approach, moving from a model characterized by pre-launch scrutiny to one that emphasizes post-facto supervision and enforcement. By streamlining the launch process for AIFs, SEBI aims to not only enhance the efficiency of the capital markets but also to encourage greater participation from investors seeking diverse investment opportunities.

In conclusion, the introduction of the GARUDA framework represents a significant step forward in the regulatory landscape for alternative investment funds in India. By simplifying the process for launching new schemes and reducing the time required for regulatory approval, SEBI is positioning AIFs to play a more pivotal role in the investment landscape. This initiative is expected to foster innovation, attract new investments, and ultimately contribute to the growth of the Indian economy.